This story was originally published on mynorthwest.com.
Washington lawmakers have now introduced the long-awaited income tax on millionaires, and the legislation includes a critical provision that will prevent voters from weighing in at the ballot box.
The bills, HB 2724 in the House and SB 6346 in the Senate, are crafted as emergency legislation “necessary for the support of the state government and its existing public institutions.” Under the Washington Constitution, that designation exempts the law from referendum, meaning opponents cannot gather signatures to suspend it and put the question to voters.
The only path to overturn the tax would be a full initiative campaign, which requires a longer timeline and an affirmative vote to repeal rather than simply blocking implementation.
The legislation also contains a poison pill: a null-and-void clause stating that if a court strikes down the income tax, the entire act dies, including all tax relief for consumers and small businesses.
Governor Ferguson says he cannot support current bill
Hours after the bills were filed, Washington Governor Bob Ferguson posted on X that while he appreciates “the hard work that went into drafting this initial proposal,” he “cannot support it in this form.”
“I have repeatedly insisted that a significant percentage of the revenue generated by the Millionaire’s Tax must go back into the pockets of Washingtonians to make life more affordable,” Ferguson wrote. “This proposal does not come close to doing that.”
Ferguson noted the plan does too little to return money directly to taxpayers. Under the current proposal, he says only about 7% — roughly $230 million — would go back to residents.
“A significant percentage of the revenue must, must, go directly back into the pockets of Washingtonians,” Ferguson said at a news conference Tuesday afternoon. “My focus will be that we are listening and hearing the voices of many, many Washingtonians who are struggling right now.”
He supports eliminating age limits for the Working Families Tax Credit, but wants broader eligibility and larger payments. He also argued the proposal’s $104 million in small‑business tax relief is far too small, calling instead for $1 billion.
The plan includes a sales‑tax exemption for hygiene products, but Ferguson wants to extend that to other essentials, including diapers.
Leaders said they expect the proposal to change significantly before anything reaches the governor’s desk, and negotiations are ongoing.
“I remain confident that we’ll get where we need to be,” Ferguson said. “There is still plenty of time left in this legislative session.”
What the WA millionaire tax bill would do
The legislation would impose a 9.9% tax on individual income above $1 million, effective January 1, 2028. That start date is one year earlier than the draft KIRO Newsradio first reported on last week. Only income exceeding the $1 million threshold would be taxed at that rate.
The bill explicitly overrides Initiative 2111, the legislature-approved measure that banned state and local income taxes in 2024. Section 1001 carves out an exemption allowing this specific tax despite the ban.
Starting October 2029, the $1 million standard deduction would be adjusted for inflation annually.
Revenue from the tax would be deposited as follows: 5% to the county public defense funding stabilization account, with the remainder going to the state general fund to support sales tax relief, the Working Families Tax Credit program, and business and occupation tax relief.
Tax relief package bundled with WA income tax
The introduced bill includes tax relief measures that were not present in the draft, though critics argue the package falls short of promises made by Democratic leaders and the governor.
The relief includes a sales tax exemption for grooming and hygiene products, beginning January 1, 2029. The bill doubles the business and occupation tax credit for small businesses from $55 to $110 per month, with certain service businesses seeing their credit increase from $160 to $320 per month. Small businesses would also benefit from a doubled B&O filing threshold, rising from $125,000 to $250,000 per year.
Democrats claim millionaire tax will fund schools, cut taxes for workers
Democratic leaders framed the legislation as a fix to what they call Washington’s “broken, nearly century-old tax structure.”
“We have an opportunity to take a giant step forward by funding public schools, health care, and services that people across the state are counting on by increasing taxes on a few thousand very wealthy people and cutting taxes for millions more,” Senate Majority Leader Jamie Pedersen said in a press release.
Democrats claim the bill would generate $3.7 billion annually and that fewer than 1% of the state’s wealthiest households would pay the tax.
House Majority Leader Joe Fitzgibbon said the proposal addresses affordability concerns while promoting economic competitiveness.
“By reforming our outdated tax code, we’re helping make life more affordable for working families and promoting our state’s economic competitiveness,” Fitzgibbon said.
Democrats argue Washington’s current tax system is among the most regressive in the nation. They say households with income in the bottom 20% pay 13.8% of their total income in taxes, while those in the top 1% pay only 4.1%, and that only Florida has a more regressive tax structure.
According to Democrats, approximately 257,000 small businesses grossing less than $250,000, which they say represents 65% of all businesses in the state, would be exempt from the Business and Occupation tax starting in 2029. The legislation would also expand the Working Families Tax Credit, a sales tax rebate for households with low to moderate incomes.
SB 6346 is scheduled for a public hearing Friday, Feb. 6, at 1:30 p.m. in the Senate Ways and Means Committee.
Republicans slam WA income tax as attack on small business
Republican leaders in both chambers came out swinging against the proposal during a week four media availability.
Senator John Braun, the Senate Republican Leader, called the bill “an attack on small and medium-sized businesses” that will “damage our economy and ultimately set the stage for driving up costs for everyone.”
Braun noted that despite Democratic promises of significant tax relief, the bill delivers less than expected.
“Contrary to claims by the majority and the governor initially that this would involve significant tax reductions of regressive taxes currently in place in Washington, there’s almost no tax reduction of any kind,” Braun said. “The biggest one is a carve-out for large companies in the form of ending the B&O surcharge a year early.”
Representative Drew Stokesbary, the House Republican Leader, warned that the $1 million threshold will not last.
“While this one is framed as a tax on millionaires, it’s only a tax on millionaires this session,” Stokesbary said. “It will quickly become a tax on regular people like you and me. We know that we can’t trust Olympia politicians.”
Stokesbary accused Democrats of “working behind the scenes with Washington’s biggest employers to figure out a way to pass an income tax that is going to devastate Washington’s economy while also benefiting big business.”
Critics challenge constitutionality of WA income tax approach
Jason Mercier, the vice president and director of research at the Mountain States Policy Center, challenged lawmakers to pursue constitutional amendments rather than legislation.
“My challenge to WA lawmakers: show that you support the rule of law by pursuing proposals within long-standing legal precedent,” Mercier wrote, citing the secretary of state’s historical record of income tax ballot measures.
Mercier pointed to six failed constitutional amendment attempts in 1934, 1936, 1938, 1942, 1970, and 1973. Washington voters have rejected income tax proposals 11 times since 1932.
The emergency clause blocking the referendum will almost certainly face a legal challenge. Critics may argue that the language is pretextual, that the tax is not truly “necessary” for support of existing institutions when the state has budget reserves and the revenue is partially earmarked for new programs rather than existing obligations.
What happens next with WA’s millionaire tax
The 60-day legislative session runs through March 12. Senate Majority Leader Jamie Pedersen has acknowledged there is no path to bipartisan support but believes Democrats have the votes to pass the legislation without Republican help.
The sponsors include Senate Majority Leader Jamie Pedersen and House Majority Leader Joe Fitzgibbon, along with dozens of Democratic co-sponsors in both chambers.
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